Turkey Enters Eurobond Market for First Time Since Elections

(Bloomberg) — Turkey tapped the eurobond market on Thursday for the first time since President Recep Tayyip Erdogan won elections in May and installed a more market friendly economic team.

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The country issued a $3 billion 10-year deal with a yield of 7.875%. Initial guidance was in the 8.375% area and the tightening of the yield by the time final terms were announced suggests demand among investors was strong.

Last year, the nation issued $2.5 billion in green bonds due in 2030 at a 9.3% yield. Since then, Turkey changed its economic strategy, ending years of ultra-loose monetary policy and raising interest rates significantly to counter inflation of around 65%.

Turkey’s credit default swaps have since declined sharply, bringing borrowing costs down. Last year’s bond now trades at a yield of around 7.8%.

Investor expectations that major central banks might embark on rate cuts later this year are fueling appetite for emerging market securities, a change in sentiment that Turkish corporates and government are eager to take advantage of.

Earlier this week, Turkey’s sovereign wealth fund sold a debut $500 million, five-year bond at a yield of 8.4%. In November, the country sold $2.5 billion of a sukuk, or Islamic notes, with a maturity of five years and a yield of 8.5%.

The Turkish treasury’s borrowing strategy shows the government’s objective is to borrow around $10 billion from international markets this year.

The banks managing the latest bond were BBVA, Citigroup Inc., Goldman Sachs Group Inc and Morgan Stanley.

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